Get Ready for a Dead-Cat Bounce. Happy New Year. -- Barrons.com

By Ian Salisbury

Investors in some of the S&P 500's worst performers may be on the verge of a so-called dead-cat bounce.

History shows stocks left for dead by the market tend to surge in December's final two weeks and January, according to Wolfe Research.

These stocks often face additional selling pressure in September and October from large investors unloading shares to register losses they can use to offset capital gains in their portfolios.

Come New Year's, the same funds frequently buy the same stocks back, giving their share prices a temporary lift.

Wolfe found the market's 100 worst performing stocks outperformed the broader market by about 2.5 percentage points, on average, between Dec. 15 and the end of January in 2006 to 2024. After that six-week window, the outperformance tends to fade.

"During February and March, the stock price performance of prior year's worst performing stocks reversed itself, many times going on to underperform for the entire year," Wolfe stated in a report.

The biggest winners in a 2025 dead-cat rally could be the S&P 500's worst performers.

Walgreens Boots Alliance and Intel top Wolfe's list of 10 key dead-cat bounce candidates.

Walgreens has struggled for years and announced plans to close 1,200 stores this fall. The stock did get a big boost on Tuesday after a report that private-equity firm Sycamore Partners is interested in buying the pharmacy chain. Shares are down 62% this year.

Another beneficiary could be chip maker Intel, which has had trouble fending off rival Taiwan Semiconductor Manufacturing. The companytook the unusual step this month of allowing its CEO to resign without naming a replacement. The stock is down 60% in 2024.

The other names on Wolfe's list:

   -- Moderna, -57% 
 
   -- Celanese, -56% 
 
   -- Dollar Tree, -50% 
 
   -- Estée Lauder, -44% 
 
   -- Enphase Energy, -44% 
 
   -- Dollar General, -41% 
 
   -- Humana, -39% 
 
   -- Biogen, -39% 

Write to Ian Salisbury at ian.salisbury@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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December 13, 2024 12:50 ET (17:50 GMT)

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